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Divided Tax Court Rules Against IRS in Rent-A-Center Captive Case


Scales of justice and Gavel

U.S. Tax Court Decision Answered Some Questions, Posed Others

In January, a long-awaited decision in the court case Rent-A-Center v. Commissioner addressed the deductibility for federal income tax purposes of premium payments made by brother/sister entities to a commonly controlled captive insurance company.

The IRS challenged Rent-A-Center's captive on several fronts, but in a 10-6 divided opinion, the U.S. Tax Court upheld the deductibility of the premiums paid to the captive.

In light of this decision, captive owners should ensure that:

  1. Their captives have more than sufficient capital to meet their obligations.
  2. Their entities are domiciled in jurisdictions that sufficiently regulate captives; and
  3. Dealings with their captive are beyond reproach.

Alan Fine, Partner, Insurance Advisory Services, discusses the lessons learned and remaining unanswered questions in the linked Captive Insurance Times article.


Download the PDF.

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